Key Takeaways

  • Gross margin surpassed analyst expectations, growing by 4 percentage points year over year (YOY).
  • Higher gross margin reflects greater operational efficiency, particularly key during the current global chip shortage.
  • AMD expects 2021 annual revenue to grow by approximately 60% YOY, driven by strong execution and increasing customer preference for its products.
AMD Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Predictions
Adjusted Earnings Per Share Beat $0.58 $0.47
Revenue (billions) Beat $3.9 $3.6
Gross Margin Beat 48% 47.0%

Source: Predictions based on analysts' consensus from Visible Alpha

AMD Financial Results: Analysis

Advanced Micro Devices, Inc. (AMD) maintained its torrid pace of growth with Q2 FY 2021 earnings that surpassed analyst predictions across the board. Adjusted earnings per share (EPS) more than quadrupled YOY to $0.58, beating analyst expectations that were already significant. Revenue also grew at a faster pace than predicted, nearly doubling YOY. The company attributed the growth to strong performance companywide and particularly in the Computing and Graphics segment and the Enterprise, Embedded, and Semi-Custom segment.

AMD's Key Metric: Gross Margin

AMD also exceeded analyst predictions for growth of the key metric of gross margin. Gross margin is a crucial metric for the semiconductor industry because computer processor chips are essentially commodity goods, giving producers little by way of pricing power. To increase gross margin, companies must either increase sales or cut costs. Consensus estimates already held that AMD's gross margin would climb by 3 percentage points YOY, a significant leap. In actuality, gross margin skyrocketed by 4 percentage points YOY.

AMD's Guidance and Stock Performance

AMD issued guidance for Q3 FY 2021 including revenue of roughly $4.0 billion to $4.2 billion, an increase of about 46% YOY and 6% on a sequential basis. The company increased its FY 2021 guidance to include revenue growth of about 60%, up from guidance of roughly 50%. It also boosted its guidance for FY 2021 gross margin from about 47% to about 48%.

AMD shares dipped immediately after market close on July 27 before more than recovering, and the stock has since fallen from the recovery spike. As of this writing, shares are up about 1.0% since market close.

Next Earnings Report

AMD's next earnings report is estimated to be released on Oct. 27, 2021.